The US Dollar violated the 50-day moving average for the first time in five months while the Euro Dollar crossed back above its 50-day moving average during the same period of time. Crude oil was up 10% as it closed above $48 a barrel and the ETN I highlighted from last week is now up 30% from its low. I do own 1/3 of my position in DXO but I can’t say I caught it below $3. I highlighted the three investments last week in a post titled:

I mentioned my idea last week: Crude Oil ETN’s. My wife and I have agreed to start purchasing a stake in crude oil investments, starting this week with a 25% purchase of our fully anticipated position (DXO is the instrument). The crude oil charts have not turned positive and I have not received any buy signals such as the ones I highlighted in the dollar earlier this year but I am viewing this more from a value perspective rather than technical. Maybe I will strikeout big time but I am swinging for it anyway.

Too many Middle East talking-heads want to cut production and raise the price of oil. Maybe I am extremely early to this “rebound/ bottom-picking game” but I can’t seem to reason how oil will stay low for long (talking years here, not a short term position).

With such negativity in the market, I decided that I would search for any glimmer of hope, a small nugget of positivity. Well, it leads us to the US Dollar, Treasury Bond Funds and the Dow Jones US Water Index. Other than that, most, if not all charts are well below their major moving averages and are still heading south.

I am not interested in buying the T-bonds or the water index but the US dollar has been front and center in my portfolio for a while now. I started to jump on the dollar bandwagon (8/24/08: US Dollar Buy Signal and 12/17/07: US Dollar Snapshot) prior to its bottom in early 2008 and I am now interested in jumping on another train.

I mentioned my idea last week: Crude Oil ETN’s. My wife and I have agreed to start purchasing a stake in crude oil investments, starting this week with a 25% purchase of our fully anticipated position (DXO is the instrument). The crude oil charts have not turned positive and I have not received any buy signals such as the ones I highlighted in the dollar earlier this year but I am viewing this more from a value perspective rather than technical. Maybe I will strikeout big time but I am swinging for it anyway.

Too many Middle East talking-heads want to cut production and raise the price of oil. Maybe I am extremely early to this “rebound/ bottom-picking game” but I can’t seem to reason how oil will stay low for long (talking years here, not a short term position).

Saudi Arabia’s king says the price of oil should be $75 a barrel, much higher than it is now, but his oil minister indicated Saturday that no measures will likely be taken until OPEC meets again next month.

“We believe the fair price for oil is $75 a barrel,” he said, without saying how the price could be raised.

Iraqi Oil Minister Hussein al-Shahristani said on Friday that 80 dollars a barrel is a “reasonable” price for oil and that his country would support any OPEC decision to cut output.

“A reasonable price for oil is 80 dollars a barrel,” said Shahristani on arrival in Cairo to attend a consultative meeting by the OPEC cartel to study slumping crude prices.

“We have to make sure that produced oil is used for consumption and not for storing.”

The market gave us 133 new lows on the NYSE and 163 on the NASDAQ, the most we have seen since last Monday, negative if you ask me. Declining issues led advancing issues by a 5-to-1 margin on the NYSE and an almost 4-to-1 ratio on the NASDAQ (two consecutive poor days after a week of positive readings).

The Dow was down 4.9% today giving us a weekly decline of 6.7% and a year-to-date drop of 34.4% (hopefully your retirement accounts are doing better, comparatively). The index did not undercut the pivot reversal low but today did mark the 8th day of a potential rally follow-through. The odds of a sustainable rally have dropped considerably since we are no longer within the 4-7 day range (a range that historically shows the greatest odds of a sustainable rally). Yes, a rally can occur within 4-10 days but the odds of it maintaining the trend lessens with each passing day. In addition, the major indexes are all trading below their 50-d and 200-d moving averages, a major red flag for any potential up-trend.

The US dollar was up slightly today and is one of the few areas of our market with a year-to-date gain, 12.2% to be exact. The dollar is actually up more than 15% since the 10/30 week moving average crossover buy signal that I highlighted in US Dollar Buy Signal on 8/24/08. I originally highlighted a possible turn of trend back in December of last year in a post titled US Dollar Snapshot.

I am not the only one that saw a bottom in the US dollar but I may be one of the few that believe this trend can last for some time. It will have many ups-and-downs but the chart of the Euro tells me that their currency is now in a confirmed long term downtrend. The 200-d moving average is now facing down, a very negative sign (the 50-d m.a. is also trending below the 200-d m.a.).[Read more…]

I only have a few things to say: the up and down swings of the market over the past few days is an illusion. The prices are not completely true as short sellers have been eliminated from the equation (in the most important area). Do we trade in a free market system? I guess not. Until the short sellers return, the rest is baloney! I wonder if that 777 point drop would have been closer to 1,500 if short sellers were in the market.

Be careful when they do return (as restrictions are lifted).

Keep this in mind: the 777 point drop may have been the largest one day point drop but it was only #17 for total percentage points at 9%. The largest drop ever was 22%.

I am still long the dollar (and believe it or not, shares in Visa). What a mess!

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Trend Trading

I am a trend trader looking for gains of 25% or more and losses no larger than 10% (preferably smaller when I am smart enough to cut the immediate loss) on trades that will last anywhere from a few weeks to several months or longer. I aim to be prepared to trade in situations when the odds are in my favor by properly employing risk management strategies such as position sizing and expectancy.